HUD’s Rental Assistance Demonstration

HUD’s Rental Assistance Demonstration

Raphael Bostic, Assistant Secretary for Policy Development and Research You are no doubt aware that the housing market has faced significant challenges over the past 5 years. While having major impacts on the ownership market, the troubles have been extremely difficult for rental markets as well, with affordability and stability emerging as particular concerns. I've previously noted that our most recent Worst Case Needs report found that the number of worst case needs households increased by 20 percent and now stands over 7 million. In addition, rent levels are rising in some of the hardest hit markets, despite a flow of foreclosures that one would have thought would have an opposite effect. In some of our urban industrial Midwestern cities, the number of renters has actually increased even as the total population has declined.

These realities place a renewed focus on policy ideas whose goals are preservation of the affordable housing stock and reinvestment to improve the quality of that stock. The Administration has been advancing several policies in this vein, with a special focus on public housing and project-based Section 8 rental assistance. While much policy energy has been placed on the Housing Choice Voucher program, sometimes called tenant-based rental assistance, there is also a long record of accomplishment for project-based rental assistance in delivering stable, reliable, affordable, and effective rent support for low-income, elderly, and disabled Americans. These modes of assistance cannot be ignored.

There is a looming crisis in this stock, though. The needs are acute: there is an estimated $25.6 B capital repair backlog across the public housing portfolio. This contributes to the loss of over 15,000 publicly owned homes to demolition or disposition each year. Public housing is not the only inventory at risk. Equally critical are the parts of our privately owned and managed affordable housing stock that are facing the end of their contract terms, with either no option to renew — true for the Rent Supplement and Rental Assistance Payment (RAP) programs — or the inability to renew on terms needed to attract capital for reinvesting in their properties — true for the Moderate Rehabilitation program.

While not good in any time, these realities are especially troublesome in the current environment. We cannot afford to lose ground in the preservation battle.

One key issue is financing. In their 2002 report Meeting Our Nation’s Housing Challenges, the Millennial Housing Commission cited the ability to obtain financing as an important obstacle to preserving and improving these properties, especially regarding the immediate and long-term capital needs these properties have. Without sufficient resources, making progress on this will be very difficult.

Into this void enters the Rental Assistance Demonstration, or "RAD." Authorized by the Congress last year, RAD seeks to build on a proven Section 8 multifamily platform that leverages limited public resources with private debt and equity to open up these capital sources for public housing and properties receiving project-based assistance. Targeting public housing authorities and owners of Rent Supplement, Rental Assistance Payment, and Moderate Rehabilitation properties, RAD features two conversion programs:

• One whereby projects funded under public housing or the Moderate Rehabilitation program can convert to a project-based voucher or project-based rental assistance framework; and
• One that allows owners of projects funded under the Rent Supplement, Rental Assistance Payment, and Moderate Rehabilitation programs due to expire between October 2006 and October 2013 to convert their tenant protection vouchers in to project-based vouchers.

Ultimately, the goal of the RAD demonstration is to establish whether such conversions, by removing some uncertainty regarding the availability of future income streams, will attract debt and equity from private sources to address immediate and long-term capital needs. If so, it will represent an important new tool for preserving and improving these properties. Importantly, a RAD solution would also protect their affordability and insure public ownership or control through long-term, renewable contracts and coterminous use-agreements. In this regard, it represents a continuation of HUD’s long-standing commitment to its tenants.

In authorizing RAD, the Congress also required that HUD assess and publish findings regarding the impact of the public housing conversions on: the preservation and improvement of the former public housing units, the amount of private capital leveraged as a result of such conversion, and the effect of such conversion on residents. PD&R is working closely with the RAD team to design this evaluation in order to have it ready for the demonstration’s full roll out, which is expected to be sometime in the late summer.

Preservation and increasing the quality of the affordable housing stock are issues that are critical for many of the nation’s communities, and are becoming even more pressing concerns in places hard hit by the foreclosure crisis and the deep recession. While the information we have on these issues informed our work on RAD and other initiatives, there remains more that we need to learn and bear in mind.

In thinking about your work and your communities, consider compiling information and conducting research on affordable housing preservation and improvement. With a deeper understanding of the state of the affordable housing stock, we can work together to make sure that appropriate policies are implemented and this important community asset is preserved.

POST NOTE: RAD was recently the subject of an Op-Ed piece in Politico. In it, two researchers discuss their analysis of RAD's likely impact on the health of tenants and nearby residents and conclude that RAD will have a detrimental effect. Unfortunately, it seems their analysis overlooked some key studies, not the least of which being the Moving to Opportunity demonstration, which showed significant positive health impacts from activities like those contemplated in RAD. Thus, their analysis appears to be incomplete in ways that call into question their main conclusion. Indeed, we at HUD are quite hopeful and expectant that RAD will ultimately be a positive force for the health of the people and communities it touches.

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